Category Archives: Corporations

Oil Companies Are Raking In The Profits — And Tax Subsidies

The big 3 oil companies have reported a combined profit of $44 billion for 2012. The New York Times reported that these earnings have actually dropped based on stated expectations earlier this year. They are attributing it to the lower gas prices. They also note that the top five oil companies receive a total of $2.4 billion in tax breaks each year

According to Republicans, in order to balance our budget, they want to cut tax credits and programs that benefit the middle class, i.e., education funding for Pell Grants and public universities, tax credits like the earned income tax credit and mortgage deductions, Meals on Wheels and food subsidies for low-income families, but they absolutely refuse to end these oil and gas industry subsidies.  

The Center for American Progress Action has analyzed Romney’s tax plan and it would actually lower the top five oil and gas companies yearly tax rates by another $2.3 billion. They say this would double what they already receive in tax breaks. 

Think Progress wrote on this subject and they actually listed some of the ways these oil companies are spending their money. 

ExxonMobil:  

– Exxon spent 42 percent — or $10.7 billion — of its 2012 profits buying back its stock, which enriches executives and largest shareholders. 

– Exxon has spent $17 million lobbying for the past 18 months, making it the top spender in the oil and gas industry. It has spent more than $52 million lobbying for the first three years of the Obama presidency, 50 percent more than in the Bush administration. 

– Exxon is sitting on $18 billion in cash reserves. 

– Exxon send federal candidates $1.3 million in campaign contributions so far this campaign cycle, sending 91 percent to Republicans

– Exxon paid just 13 percent in federal taxes last year, lower than the average American family. Right after Mitt Romney, Senate Minority Leader Mitch McConnell (R-KY) is the top recipient of Exxon federal contributions

– Exxon CEO Rex Tillerson received $24.7 million total compensation.

Royal Dutch Shell

– Shell will start drilling in the Arctic this summer, but its oil spill response plan is still behind schedule. It’s off to an inauspicious start in the Arctic, recently losing control of an Arctic drilling rig. 

– Shell has spent nearly $22 million for the past 18 months, making it the second-biggest spender of the oil and gas industry. 

– Shell has more than $17.3 billion in cash reserves. 

– Shell bought back 15 percent of its second-quarter profits, or $900 million. 

– Shell CEO Peter Voser’s compensation more than doubled in 2011 to $15.3 million. His salary increased (in euros) by 113 percent. 

– In its annual report, Shell noted that the number of oil spills increased from 195 in 2010 to 207 during 2011.

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Tax Subsidies — A Total of 56% Go To Just 4 Industries

Darrel Issa, Chairman of the House Oversight and Government Reform Committee, along with his fellow Republicans have been pushing for an investigation into the now bankrupt Solyndra, a solar company that received approximately $500 million in subsidies from the Obama administration. They are saying this has resulted in huge losses for the tax payer. This may turn out not to be true.  

CNN Money reported that during the bankruptcy hearing it was revealed the company had $859 million in assets and $749 million in liabilities at the start of 2011, and as a result there are some in Washington that believe we can actually recoup a big chunk of its cash. 

“The federal government owns the assets of borrowers that default and can manage or sell them,” Mark Muro, policy director at the Brookings Institution’s Metropolitan Policy Program, wrote in an article earlier this week. “It’s conceivable that taxpayers will not lose any money.”  

I think we should be looking at the other industries receiving subsidies from our government. This is something Republicans really don’t want to do as they are some of their biggest contributors. They have been resistant since tax reform has become the main topic in our political debates on ending these subsidies as they consider these to be a form of tax hikes (thanks to the Grover Norquist tax pledge). In all fairness though, Democrats also receive contributions from the very same industries, but they have been very focal at ending these subsidies. 

Citizens for Tax Justice has analyzed corporate tax rates from 2008 to 2010. They have examined over half of the Fortune 500 companies and it should be to no ones surprise that the richest industries are the ones that get the biggest subsidies. They found that 56 percent of the total tax subsidies went to just four industries: Financial, utilities, tele-communications, and oil, gas & pipelines.   

So I ask you, who are the biggest crooks in this system.

Republicans Plan For Reforming Corporate Tax Code — More Tax Breaks

Republicans have made big news this week. First, House Ways and Means Committee Chairman David Camp (R-MI) released his plan on reforming the corporate tax code. The plan calls for cutting the corporate tax rate from 35 to 25 percent and implementing a “territorial system” that would exempt U.S. corporations from paying taxes on money they earn overseas.

Speaker Boehner also mentioned a territorial system while speaking at the Economic Club of New York saying “Republicans are looking seriously at a territorial tax code.” Pat Garofalo’s wrote:  

Currently, U.S. corporations pay to the Treasury the difference between the tax rate of the country in which they earn money and the U.S. rate. (So money earned in a country where the rate is 25 percent would require a corporation to pay 10 percent — the difference between 35 percent and 25 percent — to the U.S.) However, corporations are allowed to defer paying their U.S. share of taxes until the bring the money back to the U.S., giving them every incentive to shift and keep money (and jobs) offshore. 

I must admit I had no idea what a territorial tax code is. It would exempt U.S. corporations from paying taxes on money they earn overseas. Citizens for Tax Justice reported on this: 

Under a territorial system, the offshore profits of a U.S. corporation would be exempt from U.S. taxes. A recent report from Citizens for Tax Justice explained that this would cause serious problems.   

First, corporations would have a greater incentive to engage in profit-shifting, meaning practices used to disguise U.S. profits as foreign profits. A common example is the manipulation of transfer pricing to shift corporate profits into tax havens (countries that do not tax, or that barely tax, certain types of profits).   

Second, corporations would have a greater incentive to shift actual operations — and jobs — to other countries.  

Our current system already encourages these practices because U.S. corporations are allowed to “defer” their U.S. taxes on their offshore profits. But the incentives would be even greater under a territorial system, in which corporations would NEVER pay U.S. taxes on their offshore profits.  

Other countries that have adopted territorial tax systems are experiencing these problems, and the European Union is considering adoption of a different system to allocate profits among EU member states.  

As CTJ’s report explains, the best alternative would be for Congress to repeal the rule allowing U.S. corporations to “defer” their U.S. taxes on offshore profits. Corporations could continue to get a credit for any taxes paid to a foreign government (just as they do now) which prevents any profits from being taxed more than once.   

Repatriation of corporate profits earned overseas  

Mr. Boehner also spoke on Monday about the possibility of a tax holiday that would allow corporations to bring the profits they earned overseas back to the U.S. without being taxed. During the Bush Administration in 2004, Congress did this and CTJ reported that there were several studies on the results of the 2004 repatriation and they showed the repatriated profits went to shareholders and not to job-creation, despite the promises made by corporate lobbyists. 

Speaker Boehner, during the same speech on Monday, also “demanded that ‘trillions’ be cut from public services — a goal that would be impossible without sharply cutting Social Security, Medicare, and Medicaid. 

In summary, the Republicans GREAT idea on reforming the corporate tax policy will end up lowering even further corporate taxation and incentivizing corporations to shift their operations overseas. At the same time they want to gut the services like Medicare, Pell Grants, Education funding…basically anything that helps the working class. 

These guys really do live in a bubble.

40% of World’s Wealth Controlled by ‘super-entity’ of 147 companies

An article recently published by Daniel Tencer, a contributor for Huffington Post Canada, writes about a study that focuses on who controls the wealth in the world, not the United States, but the world. It focuses in on how a very few in our world actually control 40 percent of the weatlh (entire study can be found here).  

Top Control-Holders Ranking  

This is the first time a ranking of economic actors by global control is presented. Notice that many actors belong to the financial sector (NACE codes starting with 65,66,67) and many of the names are well-known global players. The interest of this ranking is not that it exposes unsuspected powerful players. Instead, it shows that many of the top actors belong to the core. 

This means that they do not carry out their business in isolation but, on the contrary, they are tied together in an extremely entangled web of control. This finding is extremely important since there was no prior economic theory or empirical evidence regarding whether and how top players are connected. Finally, it should be noted that governments and natural persons are only featured further down in the list. 

Daniel Tencer’s article: 

A Swiss study appears to have uncovered what anti-capitalist activists have been claiming for years — that the global economy is controlled by a small group of deeply interconnected entities.

The researchers say that while there’s nothing wrong, in and of itself, with the concentration of capital in the hands of a small number of companies, when those companies become too interconnected, they can cause chain reactions that can harm the economy. 

“If one [company] suffers distress,” study co-author James Glattfelder said, “this propagates [itself].”   

That fits with recent experience; the financial crisis of 2008 began as a problem of excessive liabilities at a handful of companies. But these companies had financial links to the rest of the industry, and their insolvency threatened to take down the entire financial system. 

According to the study, which will be published shortly in the scientific journal PLoS Onethere is a core group of 1,318 multinational companies that sit at the centre of global commerce. They own a majority of shares in 60 per cent of the world’s large businesses and manufacturers.  

Within that group, the researchers identified a “super-entity” of 147 companies that control 40 per cent of the wealth within the multinational commerce network. According to the researchers, each of the 147 companies is owned by other companies within the “super-entity,” essentially creating a self-contained network of wealth.  

The researchers say their work is evidence the world may need global anti-trust regulations — rules designed to keep companies from becoming too large in their sector, or from developing de facto agreements to cooperate with competitors.  

Here is a list of the top five corporations (study findings can be found here).  

1. Barclays 

 The 321-year-old British bank Barclays plc has been a mover and shaker in the world of finance since before anyone had conjured up the word “capitalism.” In the 1990s, the bank’s prominence in the UK made it a target of “Mardis Gras Bomber” Edgar Pearce. In 2008, Barclays bought the investment banking and trading divisions of Lehman Brothers, the Wall Street financial firm whose bankruptcy triggered the financial crisis.  

2. Capital Group Company   

Founded by self-made financier Jonathan Bell Lovelace in 1931, Capital Group Companies today manages more than $1 trillion of assets with a surprisingly small staff, around 7,500 people. The Los Angeles-based investment management firm likes to keep a low profile, and counts Fidelity Investments among its largest competitors.  

3. Fidelity Investments  

Fidelity Investments is primarily a brokerage and mutual fund manager. The company has seen significant job reductions, with its staff falling from 47,000 in 2007 to 38,000 in 2009 — a sign that even companies near the centre of global power aren’t immune from downsizing.  

4. AXA Insurance  

Paris-based AXA manages more than $1.1 trillion of other people’s money, has $730 billion in assets and employs more than 100,000 people around the world. AXA CEO Henri de Castries is shown here in 2008.  

5. State Street Corporation   

This 209-year-old, Boston-based company ranks in fifth place on Vitali et al’s Network of Global Corporate Control. The company manages more than $2 trillion in assets, has assets itself of around $160 billion, and employs just short of 30,000 people.

How Wall Street Is Shifting Money From Pensions to the Top 1%

Since the beginning of Occupy Wall Street, corporate media and political pundits have been trying minimize OWS. The problem these news agencies aren’t addressing and what OWS is bringing to the forefront is the staggering income inequality. Our income inequality is worse that some third world countries like Trinidad and Tobago, Mozambique and Tunisia, and the amount of wealth here in the US dwarfs these countries.  

Wall Street has many tricks to shift the wealth from the middle class to the top 1 percent and one way, which has not been talked about much is the way they have decimated pension funds. Investigative journalist Ellen Schultz wrote the book Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workersthat exposes some of the tricks corporations have used to shift money from the working people’s pensions to their top executives.  

Here is what Ms. Schultz writes. 

It’s no secret that hundreds of companies have been slashing pensions and health coverage earned by millions of retirees. Employers blame an aging workforce, stock market losses, and spiraling costs- what they call “a perfect storm” of external forces that has forced them to take drastic measures.  

But this so-called retirement crisis is no accident. Ellen E. Schultz, award-winning investigative reporter for the Wall Street Journal, reveals how large companies and the retirement industry-benefits consultants, insurance companies, and banks-have all played a huge and hidden role in the death spiral of American pensions and benefits. 

A little over a decade ago, most companies had more than enough set aside to pay the benefits earned by two generations of workers, no matter how long they lived. But by exploiting loopholes, ambiguous regulations, and new accounting rules, companies essentially turned their pension plans into piggy banks, tax shelters, and profit centers. 

Drawing on original analysis of company data, government filings, internal corporate documents, and confidential memos, Schultz uncovers decades of widespread deception during which employers have exaggerated their retiree burdens while lobbying for government handouts, secretly cutting pensions, tricking employees, and misleading shareholders. 

She reveals how companies: 

  • Siphon billions of dollars from their pension plans to finance downsizings and sell the assets in merger deals. 
  • Overstate the burden of rank-and-file retiree obligations to justify benefits cuts while simultaneously using the savings to inflate executive pay and pensions. 
  • Hide their growing executive pension liabilities, which at some companies now exceed the liabilities for the regular pension plans. 
  • Purchase billions of dollars of life insurance on workers and use the policies as informal executive pension funds. When the insured workers and retirees die, the company collects tax-free death benefits. 
  • Preemptively sue retirees after cutting retiree health benefits and use other legal strategies to erode their legal protections. 

Though the focus is on large companies, which drive the legislative agenda, the same games are being played at smaller companies, non-profits, public pensions plans and retirement systems overseas. Nor is this a partisan issue. Employees of all political persuasions and income levels-from managers to miners, pro-football players to pilots-have been slammed.

We The People of Occupy Wall Street Want Justice – Time To Prosecute the Bankster Crooks

One of the recurring issues being raised by the Occupy Wall Street protesters is the lack of accountability by the Wall Street executives for taking our economy over the cliff.

In fact, they are now bringing in record profits with another round of record bonuses expected. Meanwhile not one person from Wall Street has been prosecuted with the exception of Madoff and a hedge-fund tycoon, Raj Rajaratnam, who was ordered to serve 11 years in prison for insider-trading. 

They have successfully escaped any repercussions from creating such things as credit-default swaps. Michael Greenberger, a law professor at the University of Maryland, explains: 

A credit default swap is a contract between two people, one of whom is giving insurance to the other that he will be paid in the event that a financial institution, or a financial instrument, fails. It is an insurance contract, but they’ve been very careful not to call it that because if it were insurance, it would be regulated. So they use a magic substitute word called a ‘swap,’ which by virtue of federal law is deregulated.   

Who was selling this? Banks like Bear Sterns, Lehman Brothers, AIG, Bank of America, and Citigroup. Yet not one executive from any of these banks has been arrested, charged, and prosecuted. How can that happen? It has something to do with the revolving door between our government and Wall Street. President Obama has chosen to surround himself with former Wall Street executives including former Goldman Sachs CEO Jon Corzine, Evercore Partners executive Charles Myers, Greenstreet Real Estate Partners CEO Steven Green, and Azita Raji, a former investment banker for JP Morgan. 

Tim Geithner was interviewed on CNBC yesterday and was asked about the OWS movement and their claims of the lack of prosecutions. He said that the Administration is getting right on the whole “prosecuting the people who defrauded the economy” thing. Geithner said action is on the way. “You’ve seen very, very dramatic enforcement actions already by the enforcement authorities across the U.S. government, and I’m sure you’re going to see more to come. You should stay tuned for that.”  

David Dayen of FireDogLake had his own version Geithner’s response: 

Let me rewrite that: “We moved within a year and a half of getting in office to put in place a relatively stronger set of rules of the game, in the sense that 1/8 is stronger than 1/16, across the financial sector. Now, we’re now facing a lot of resistance to those rules, and we’re accommodating that resistance by gutting the rules in implementation. We’re going to make sure that we deliver the promise of those reforms, or at least the promise we made to the finance lobby to back off and let them grow their way back to the top.” 

Unfortunately, I don’t see the Hope and Change candidate changing all that much. Saying that, I still think given the 2 parties and the candidate we have to choose from, Obama is still the better choice….but that is not saying much. 

I know there are people out there that will disagree saying he has tried, but keep in mind in 2008, he was swept in with a majority in both Houses, and even though he did have obstacles even within his own party, he chose to do nothing. He chose to ignore the crimes committed by Wall Street and as a result Eric Holder has done pretty much nothing.

Too Big To Fail – Wall Street Making Sure It Will Happen Again

The movie based on the extremely popular book Too Big To Fail by Andrew Ross Sorkin is coming out soon, and there was recently a screening in New York that was attended by our current Treasury Secretary, Tim Geithner. After the screening Geithner told the crowd that attended something that no one wanted to hear, he predicted another big crisis will be coming.  

“It will come again. There will be another storm, but it’s not going to come for a while. I’m certain we will” experience another catastrophe. He just couldn’t say when or what kind. “You will not know” when, which he is how he answered Sorkin when he tried to pin Geithner down. “It’s not going to be possible for people to capture risk with perfect foresight and knowledge.”

Keep in mind this is at a time when Republicans are trying to remove a lot of the oversight regulations that were instituted after the 2008 Wall Street crash. They are also opposing appointment of Elizabeth Warren to the Consumer Financial Protection Bureau, which was created to protect consumers, and are trying to weaken its regulatory power in order to protect corporations

A GOP bill that was proposed aimed to make it easier for the Financial Stability Oversight Commission to overrule decisions that the CFPB might make in favor of consumers. It would require a simple majority vote by FSOC, instead of a two-thirds majority.

Republicans argued that the changes the bill would produce would make the consumers’ bureau more transparent and accountable, and protect more small banks. Democrats contended that the revisions would only weaken the CFPB, and give financial institutions a stronger say.

To prove Democrats’ point, Maloney offered another amendment that would have defined the “safety and soundness” mentioned in the proposal to exclude profits. Her point was that consumer-friendly decisions generally come at the expense of profits, and — if profitably is a standard — there would be a ready rationale to overturn almost any CFPB rule or finding.

“I am not saying that a financial institution should not be able to make a profit,” Maloney said in the hearing. “I am simply saying that, if you are going to put an extraordinary check on the CFPB’s ability to protect consumers, then a financial institution’s profitability should not come at the expense of consumers.”